Economy

I-T department introduces tool for calculating TDS on cash withdrawals under new rules

Hemani Sheth Mumbai | Updated on July 04, 2020 Published on July 04, 2020

The Income Tax (I-T) Department has launched a new tool to determine TDS (tax deducted at source) on cash withdrawals.

The tool is meant to be used only by banks and other financial institutions to calculate TDS applicable for a recipient under Section 194N of the income tax act.

The tool is available on the IT department’s e-filing portal. Financial institutions can click on ‘Verification of applicability u/s 194N’ under the ‘Quick Links’ menu on the department’s e-filing portal to access the tool and calculate TDS for a recipient.

“A functionality to determine TDS rate u/s 194N has been enabled in e-Filing portal for Banks, co-operative society and post office,” reads the description.

A user can go to the link and type in their PAN (Permanent Account Number) and mobile number to access the same. An OTP ill be shared on the mobile number for verification. Banks, post offices and cooperative societies can then proceed to calculate the TDS applicable for an individual.

Otherwise, an individual may be asked to sign a declaration letter that needs to be filed along with a copy of the acknowledgement of return of Income (ITR-V) of FY 2018-19, FY 2017-18 and FY 2016-17 to get an exemption from the deduction as per the new rules, LiveMint reported.

The government had introduced Section 194N in the Income Tax Act in July 2019 to discourage cash transactions in the country and promote a digital economy by making tax deducted at source (TDS) at the rate of 2 per cent applicable on cash withdrawals over and above ₹1 crore.

The Finance Act, 2020 amended the section and lowered the threshold of ₹1 crore to ₹20 lakh. It further tied TDS on cash withdrawals to IT returns. TDS will be applicable for cash withdrawals of ₹20 lakh and above for those who have not filed their income tax returns (ITRs) for the past three years. Further, the rate of TDS has also been increased to 5 per cent for these taxpayers for withdrawal exceeding ₹1 crore.

For those who have filed their returns regularly, TDS of 2 per cent will be applicable for cash withdrawals of above ₹1 crore.

The new rules came into effect starting this month.

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Published on July 04, 2020
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